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Management Bulletin 17-09

Early Learning and Care Division

Subject: Graduated Phase-Out (Recertification)

Number: 17-09

Date: July 2017

Expires: Until Rescinded

Authority: California Education Code, Section 8263.1

Attention: Executive Officers and Program Directors of Child Development Programs


The purpose of this Management Bulletin (MB) is to notify contractors of the new ongoing income ceilings to be used to determine ongoing income eligibility for families at recertification for subsidized child development services.


A “graduated phase-out” of a government benefit refers to when the ceiling by which a person or family can continue to receive a government benefit increases after initial approval of the benefit. Assembly Bill (AB) 99, as enacted by the Budget Act of 2017, implemented a “graduated phase-out” by allowing the amount of income a family could earn to increase from 70 percent of the State Median Income (SMI) when the family is initially approved for services to 85 percent of the SMI. This allows families to remain continuously eligible for child care services for a longer period of time and gives families an opportunity to gradually increase their monthly income before services will be terminated.

Assembly Bill 99, Chapter 15, Statutes of 2017 amended California Education Code (EC) Sections 8263 and 8263.1 resulting in changes to the following requirements:

  • State Median Income (Initial Certification)
  • Graduated Phase-out (Recertification)
  • Updated Income Rankings
  • Revised Family Fee Schedule
  • Minimum Twelve-Month Eligibility

A separate MB will be issued for each of the requirements listed above. Please refer to the Other Relevant Information section below for more information.


As set forth in MB 17-08, Assembly Bill 99 amended EC Section 8263.1(a) to provide that a family’s adjusted monthly income must be at or below 70 percent of the most recent State Median Income (SMI), adjusted for family size, as calculated by the California Department of Finance (DOF), pursuant to the formula set forth in EC Section 8263.1 (c). 

Pursuant to amendments to EC Section 8263.1(b), families that are certified as income eligible for services, including those currently enrolled, are to now remain income eligible for services until their adjusted monthly income exceeds 85 percent of the most recent SMI, adjusted for family size. In accordance with EC Section 8263(h)(2), once certified or recertified as income eligible for services, families have an obligation to report increases in income that exceed the 85 percent threshold for ongoing income eligibility, and the family’s ongoing eligibility for services shall at that time be redetermined. As explained below, contractors must notify parents at the time of initial certification, and at recertification, of the applicable 85 percent exit threshold based on their family size and the duty to report when increases in income exceed that threshold.


Effective July 1, 2017, only families that have been determined income eligible for services, including currently enrolled families, will remain eligible for services until their adjusted monthly income exceeds 85 percent of the SMI, adjusted for family size or until their regularly scheduled recertification date, whichever comes first. Families whose adjusted monthly income exceeds 85 percent of the SMI, will have reached the exit threshold and are no longer income eligible for ongoing subsidized services.

At initial certification, contractors will determine a family’s initial income eligibility. At recertification, families continue to be income eligible when the family’s adjusted monthly income remains at or below 85 percent of the SMI, adjusted for family size.

For Fiscal Year 2017–18, contractors must use the following table when determining ongoing income eligibility at recertification.

Schedule of Income Ceilings (85 percent SMI) for Recertification Child Care and Development Programs*
Family Size Family Monthly Income Family Yearly Income


*Ceilings based on 2015 American Community Survey (ACS) information provided by California Department of Finance. Ceilings may revised yearly to reflect most current ACS information.

When the family’s basis of eligibility is income, contractors must inform parents, at the time of initial certification and at recertification, of the requirement to report when their income exceeds the exit threshold. Specifically, contractors must inform the parent in writing of the maximum adjusted monthly income the family could earn, based on the family size most recently certified, before the family is no longer income eligible for services. To do this, the contractor must provide the family with a copy of the most recent Schedule of Income Ceilings (85 percent of the SMI) for Recertification, as published by the State Superintendent of Public Instruction, with the maximum adjusted monthly income the family may earn clearly identified on the table.

As is detailed in MB 17-14, a family that meets eligibility requirements at initial certification or recertification is considered eligible until the next recertification. A payment made by a child development program for a child during this period will not be considered an error or an improper payment due to a change in the family’s circumstances during that same period. (EC Section 8263[i]).

For example, the maximum eligibility amount (threshold) for a family of four receiving subsidized services would be an adjusted monthly income of $5,922. The contractor must provide a copy of the most recent Schedule of Income Ceilings (85 percent of the SMI) for Recertification clearly indicating the maximum adjusted monthly income of $5,922 for a family of four. Continuing this example, if eight months later, the family of four reports their adjusted monthly income is over $5,922, this triggers EC Section 8263(h)(2), requiring the contractor to recertify the family. If the family does not meet any other category of eligibility, the contractor must disenroll and issue a Notice of Action citing the family has exceeded the 85 percent of the SMI adjusted for family size. As a reminder, EC Section 8263 (c) provides that if a family is no longer eligible to receive services, but is eligible for another program, they may be able to continue to receive services if the contractor is able to transfer the family’s enrollment to another program. 

The Early Learning and Care Division will provide Technical Assistance related to implementation of program requirements impacted by the Budget Act throughout Fiscal Year 2017–18.

The revised Family Fee Schedule reflecting fees for incomes up to 85 percent of SMI is pending approval from DOF, pursuant to EC Section 8263.1(c).

Other Relevant Information

For more information on the requirements, please see the associated management bulletins linked below:

If you have any questions regarding the information in this MB, please contact your assigned Early Learning and Care Field Services Consultant via the CDE’s Consultant Regional Assignments Web page located at, or by phone at 916-322-6233.

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Questions:   Early Learning and Care Division | 916-322-6233
Last Reviewed: Thursday, January 18, 2024
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